Seminar by Alan Rai
- Speaker: Alan Rai - Lecturer, Department of Applied Finance and Actuarial Studies, Macquarie University
- When: 16th March, 2012, (Fri)
This paper assesses the impact of the various "unconventional" policies introduced by the U.S. Federal Reserve, during the 2007-09 Financial crisis period, on credit market spreads. I also examine the impact of the"conventional" monetary policy stance, defined as the difference between the effective Federal Funds rate and the rate implied by a Taylor rule. Examining policies initiated between July 2007 and early 2009, I find that fiscal policy announcements exerted a significant and destabilising influence on market spreads. I also find that while the multitude of "unconventional" monetary policy initiatives were effective in reducing market spreads, the efficacy of these policies was reduced by the sustained contractionary stance in conventional monetary policy. In short, the Federal Reserve's success in reducing strains in U.S. credit markets appears to have been undermined by their inability (or, more provocatively, their failure) to achieve their broader macroeconomic objectives.
To view the full paper click - The impact of policy initiatives on credit spreads during the 2007-09 financial crisis